Workshop on using big data for forecasting and statistics Monday, 7 and Tuesday, 8 April 2014 European Central Bank, Eurotower Frankfurt am Main [Please select] [Please select] Ellen Tobback Department of Engineering Management, University of Antwerp Speaker Walter Daelemans Department of Linguistics, University of Antwerp Hans Naudts DG ECFIN, European Commission Enric Junqué de Fortuny Department of Engineering Management, University of Antwerp David Martens Department of Engineering Management, University of Antwerp Belgian Economic Policy Uncertainty Index: Improvement through text mining 3 Problem setting News article about economic policy uncertainty? 1. Naive method: Yes, contains the words uncertainty, economy and fiscal 2. Modality annotation 3. Text classification 'Grexit' Fears Unsettle Markets as Stocks Drop amid Eurozone Uncertainty There is still no end to the political crisis in Greece, with no government having been formed. It is not even clear if Greece will pay out on a bond maturing on 15 May. Uncertainty has Uncertainty has unsettled unsettled the the markets, with all the major stock markets falling and the euro weakening. Nothing conclusive has emerged from the day and the markets will enter tomorrow once again unsure of what exactly is going to happen to the eurozone and if and when Greece will leave the single currency. There has been much focus on the current crises in Spain and Greece, but Italy shouldn't be forgotten. It has flirted with the 7 percent "unsustainable" yield benchmark on its 10-year bonds in the past and as the eurozone's third largest economy a worse than expected contraction could open up a new front in the single currency area's battle to survive. Schaeuble says euro stability must be maintained by both monetary and fiscal means. Naive Method Shortcomings of the method Two main shortcomings of this method: 1. Every article that meets the search criteria is added to the index Historically large amount of poppy fields in Afghanistan 2. Articles that address EPU without mentioning the necessary keywords are excluded from the index Spanish domino pieces totter due to Greek crisis 4 5 Problem setting News article about economic policy uncertainty? 1. Naive method : Yes, contains the words uncertainty, economy and fiscal 2. Modality annotation Yes, modality score is larger than the cutoff-value 3. Text classification Yes, linear model has a positive output 'Grexit' Fears Unsettle Markets as Stocks Drop amid Eurozone Uncertainty There is still no end to the political crisis in Greece, with no government having been formed. It is not even clear clear ifif Greece will pay out on a bond maturing on 15 May. Uncertainty has Uncertainty has unsettled unsettled the the markets, with all the major stock markets falling and the euro weakening. Nothing conclusive conclusivehas has emerged from the day and the markets will enter tomorrow once again unsure of what exactly is going to happen to the eurozone and if and when Greece will leave the single currency. There has been much focus on the current crises in Spain and Greece, but Italy shouldn't be forgotten. It has flirted with the 7 percent "unsustainable" yield benchmark on its 10-year bonds in the past and as the eurozone's third largest economy a worse than expected contraction could could open up a new front in the single currency area's battle to survive. Schaeuble says euro stability must be maintained by both monetary and fiscal means. Document classification • Unstructured textual data to structured data • Bag of words approach Article Greece eurozone crisis increased output Rupo … EPU? A1 1 1 1 0 0 0 Yes (1) A2 0 0 0 1 1 0 No (-1) A3 0 0 1 0 0 1 Yes (1) A1: The eurozone crisis is A3: The political impasse EPU = sign(1.2 x Greece – 0.02 x increased + 0.8 x crisis + ….)could drag escalating, especially in Belgium 96% around Greece. A euro the country into aAccuracy euro A2: US manufacturing output increased more than crisis. Formateur Elio di Newarea break-up would be expected. The economic Greece eurozone crisis increased output Rupo to resign … .. EPU? chaotic.. Rupo offered article activity in the world's leading Ax 1 1 economy is picking up… 1 0 0 0 YES Text classification Discriminating words 7 8 Fortis takeover Banking crisis Stock market downturn temporary bottom Referendum Greece Nationalisation Belfius Municipal and federal elections Greek bailout Iraq invasion Correlations EPU naive 9 EPU modality EPU SVM OLO-Bund spread Q2 (consumer) 0.214 0.051 0.203 0.264 Q4 (consumer) 0.637 0.267 0.6033 0.738 Q5 (producer) 0.539 -0.033 0.45 0.609 OLO-Bund Spread 0.662 0.360 0.872 Conclusion • Each method selects different articles three different EPU indicators • Advantages of using text classification • Isolating country-specific EPU allows for scope refinement • Irrelevant articles unlikely to influence the EPU-index • Discriminating words defined by the model • Towards automated tool for real-time nowcasting of macroeconomic variables based on online news 10 Questions? Comments? Contact information [email protected]
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